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Aterian Reports Third Quarter 2021 Results

·24 min read

Quarterly Net Revenue Grew 16% Year-Over-Year to $68.1 Million With Positive Adjusted EBITDA

Quarterly Direct Revenue (excluding Wholesale and PPE) Grew 37% Year-Over-Year

Company Optimizing its Supply Chain and Secures Competitive Shipping Rates

NEW YORK, Nov. 08, 2021 (GLOBE NEWSWIRE) -- Aterian, Inc. (Nasdaq: ATER) (“Aterian” or the “Company”) today announced results for the third quarter ended September 30, 2021.

Third Quarter 2021 Highlights

  • Net revenue grew 16% year over year to $68.1 million, compared to $58.8 million in the third quarter of 2020.

  • Gross margin improved to 50.2% compared to 47.8% in the third quarter of 2020.

  • Contribution margin declined to 12.1% from 19.1% in the third quarter of 2020 mainly as a result of cost increases due to supply chain disruptions.

  • Operating income declined to a loss of $7.5 million, compared to operating income of $0.1 million in the third quarter of 2020.

  • Operating expenses were $41.7 million which is an increase from $28.0 million in the third quarter of 2020. Operating expenses for the third quarter of 2021 include a $4.2 million benefit from the change in fair-value of earn out liabilities.

  • Fixed operating expenses increased as a percentage of net revenue to 11.3% compared to 10.5% in the third quarter of 2020 when excluding non-cash stock-based compensation and amortization of intangibles of $11.4 million in the third quarter of 2021 and $4.9 million in the third quarter of 2020 and $4.2 million benefit from the change in fair-value of potential future performance based earnouts from acquisitions in 2021.

  • Net loss of $(110.6) million, which includes a $(107.0) million loss from extinguishment of debt, a $8.1 million gain from the change in fair value of warrants, and a $(1.4) million gain associated with a derivative liability from our term loan, increased from a net loss of $(0.8) million in the third quarter of 2020.

  • Adjusted EBITDA of $0.7 million decreased compared to $5.1 million in the third quarter of 2020.

  • No new products launched in the third quarter compared to 8 in the third quarter of 2020.

  • Total cash balance at September 30, 2021 decreased by $24.4 million from June 30, 2021 to $37.5 million.

Yaniv Sarig, Co-Founder and Chief Executive Officer, commented, “This quarter was an all-hands effort to stabilize our business, strengthen our balance sheet and prepare Aterian to pursue our growth trajectory as we approach 2022. In July of this year, the price of shipping containers from China to the United States skyrocketed to over $20,000. This left us in a challenging situation and we were forced to raise prices to offset our costs at the expense of our sales volume and margins. We acted quickly to protect the company and reached an agreement with our lender to reduce our debt while also focusing on negotiations with our logistics partners to secure better shipping rates. Our team put in a tremendous effort to re-engineer our entire 2022 manufacturing and shipping plan. Our logistics team has successfully secured new competitive shipping rates with various partners including Amazon, Flexport and XPO, who have proven to be great partners through these disruptions. Although the risks related to the COVID-19 pandemic and its impact on global supply chains have not subsided, we believe that the work we have done is setting us up to accelerate growth again in 2022 organically and through an expected resumption of our M&A strategy.”

Non-GAAP Financial Measures
For more information on our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, please see the “Non-GAAP Financial Measures and Reconciliations” section below.

Webcast and Conference Call Information
Aterian will host a live conference call to discuss financial results today, November 8, 2021, at 5:00 p.m. Eastern Time. To access the call, participants from within the U.S. should dial (877) 295-1077 and participants from outside the U.S. should dial (470) 495-9485 and provide the conference ID: 7237999. Participants may also access the call through a live webcast at https://ir.aterian.io/investor-relations. Please visit the website at least 15 minutes prior to the start of the call to register and download any necessary software. The archived online replay will be available for a limited time after the call in the Investor Relations section of the Aterian website.

About Aterian, Inc.
Aterian, Inc. (Nasdaq: ATER), is a leading technology-enabled consumer products platform that builds, acquires, and partners with best-in-class e-commerce brands by harnessing proprietary software and an agile supply chain to create top selling consumer products. The Company’s cloud-based platform, Artificial Intelligence Marketplace Ecommerce Engine (AIMEE™), leverages machine learning, natural language processing and data analytics to streamline the management of products at scale across the world’s largest online marketplaces, including Amazon, Shopify and Walmart. Aterian has thousands of SKUs across 14 owned and operated brands and sells products in multiple categories, including home and kitchen appliances, health and wellness, beauty and consumer electronics.

Forward Looking Statements
All statements other than statements of historical facts included in this press release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements including, in particular, the statements regarding our growth trajectory; the strength of our balance sheet; global supply chain disruptions; our shipping rates; the re-engineering of our 2022 manufacturing and shipping plans; our strategic decisions and defensive moves and the potential for such decisions and moves to address the global supply chain disruptions; our expectations around accelerating growth in 2022 and any resumption of our M&A strategy. These forward-looking statements are based on management’s current expectations and beliefs and are subject to uncertainties and factors, all of which are difficult to predict and many of which are beyond our control and could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to; those related to the global shipping disruptions, our ability to continue as a going concern, our ability to meet financial covenants with our lenders, our ability to create operating leverage and efficiency when integrating companies that we acquire, including through the use of our team’s expertise, the economies of scale of our supply chain and automation driven by our platform; those related to our ability to grow internationally and through the launch of products under our brands and the acquisition of additional brands; those related to the impact of COVID-19, including its impact on consumer demand, our cash flows, financial condition and revenue growth rate; our supply chain including sourcing, manufacturing, warehousing and fulfillment; our ability to manage expenses, working capital (including for PPE products) and capital expenditures efficiently; our business model and our technology platform; our ability to disrupt the consumer products industry; our ability to grow market share in existing and new product categories, including PPE; our ability to generate profitability and stockholder value; international tariffs and trade measures; inventory management, product liability claims, recalls or other safety and regulatory concerns; reliance on third party online marketplaces; seasonal and quarterly variations in our revenue; acquisitions of other companies and technologies, our ability to continue to access debt and equity capital (including on terms advantageous to the Company) and the extent of our leverage and other factors discussed in the “Risk Factors” section of our most recent periodic reports filed with the Securities and Exchange Commission (“SEC”), all of which you may obtain for free on the SEC’s website at www.sec.gov.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, even if subsequently made available by us on our website or otherwise. We do not undertake any obligation to update, amend or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Investor Contact:

Ilya Grozovsky
Director of Investor Relations & Corp. Development
Aterian, Inc.
ilya@aterian.io
917-905-1699


ATERIAN, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share data)

December 31,
2020

September 30,
2021

ASSETS

CURRENT ASSETS:

Cash

$

26,718

$

37,470

Accounts receivable—net

5,747

9,292

Inventory

31,582

71,273

Prepaid and other current assets

11,111

12,831

Total current assets

75,158

130,866

PROPERTY AND EQUIPMENT—net

169

1,299

GOODWILL—net

47,318

118,619

OTHER INTANGIBLES—net

31,460

67,355

OTHER NON-CURRENT ASSETS

3,349

3,546

TOTAL ASSETS

$

157,454

$

321,685

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Credit facility

$

12,190

$

Accounts payable

14,856

24,640

Term loan

21,600

Seller notes

16,231

8,827

Contingent earn-out liability

1,515

14,886

Accrued and other current liabilities

8,340

18,177

Total current liabilities

74,732

66,530

OTHER LIABILITIES

1,841

379

CONTINGENT EARN-OUT LIABILITY

21,016

16,667

TERM LOANS

36,483

25,454

Total liabilities

134,072

109,030

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS’ EQUITY:

Common stock, par value $0.0001 per share—500,000,000 shares authorized and 27,074,791 shares outstanding at December 31, 2020; 500,000,000 shares authorized and 50,049,660 shares outstanding at September 30, 2021

3

5

Additional paid-in capital

216,305

635,296

Accumulated deficit

(192,935

)

(422,350

)

Accumulated other comprehensive income (loss)

9

(296

)

Total stockholders’ equity

23,382

212,655

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

157,454

$

321,685

See notes to condensed consolidated financial statements.


ATERIAN, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share data)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2021

2020

2021

NET REVENUE

$

58,783

$

68,121

$

144,212

$

184,446

COST OF GOODS SOLD

30,688

33,946

78,218

91,464

GROSS PROFIT

28,095

34,175

65,994

92,982

OPERATING EXPENSES:

Sales and distribution

18,944

32,337

51,472

96,716

Research and development

1,846

2,767

6,578

7,220

General and administrative

7,199

10,843

23,554

31,807

Change in fair value of contingent earn-out liabilities

(4,245

)

(11,949

)

TOTAL OPERATING EXPENSES:

27,989

41,702

81,604

123,794

OPERATING INCOME (LOSS)

106

(7,527

)

(15,610

)

(30,812

)

INTEREST EXPENSE—net

934

2,786

3,120

11,877

CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITY

1,360

3,254

LOSS ON EXTINGUISHMENT OF DEBT

106,991

136,763

CHANGE IN FAIR VALUE OF WARRANT LIABILITY

(8,134

)

26,455

LOSS ON INITIAL ISSUANCE OF WARRANT

20,147

OTHER EXPENSE (INCOME)

(23

)

5

(4

)

43

LOSS BEFORE INCOME TAXES

(805

)

(110,535

)

(18,726

)

(229,351

)

PROVISION FOR INCOME TAXES

21

46

64

NET LOSS

$

(805

)

$

(110,556

)

$

(18,772

)

$

(229,415

)

Net loss per share, basic and diluted

$

(0.05

)

$

(3.13

)

$

(1.18

)

$

(7.55

)

Weighted-average number of shares outstanding, basic and diluted

17,090,050

35,359,999

15,903,517

30,383,375

See notes to condensed consolidated financial statements.


ATERIAN, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)

Nine Months Ended September 30,

2020

2021

OPERATING ACTIVITIES:

Net loss

$

(18,772

)

$

(229,415

)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

179

4,757

Provision for sales returns

77

398

Amortization of deferred financing costs and debt discounts

914

7,730

Stock-based compensation

17,472

21,330

Gain from increase of contingent earn-out liability fair value

(11,949

)

Loss in connection with the change in warrant fair value

26,455

Loss on initial issuance of warrant

20,147

Loss extinguishment of High Trail December 2020 and February 2021 Term Loan

28,240

Loss extinguishment of High Trail April 2021 Term Loan

106,991

Loss extinguishment of Credit Facility

1,532

Loss from derivative liability discount related to term loan

3,254

Allowance for doubtful accounts and other

5

4,597

Changes in assets and liabilities:

Accounts receivable

(7,492

)

(3,765

)

Inventory

17,235

(27,531

)

Prepaid and other current assets

(320

)

(7,219

)

Accounts payable, accrued and other liabilities

(1,698

)

13,999

Cash provided by (used in) operating activities

7,600

(40,449

)

INVESTING ACTIVITIES:

Purchase of fixed assets

(33

)

(14

)

Purchase of Truweo assets

(14,032

)

Purchase of Healing Solutions assets

(15,250

)

Purchase of Photo Paper Direct, net of cash acquired

(10,583

)

Purchase of Squatty Potty assets

(19,040

)

Cash used in investing activities

(14,065

)

(44,887

)

FINANCING ACTIVITIES:

Proceeds from warrant exercise

12

9,051

Proceeds from cancellation of warrant

16,957

Proceeds from equity offering, net of issuance costs

23,416

36,735

Proceeds from exercise of stock options

8,749

Repayment of note payable related to Aussie Health acquisition

(207

)

Repayments on note payable to Smash

(9,254

)

Taxes paid related to net settlement upon vesting of restricted common stock

(112

)

Borrowings from MidCap credit facility

99,508

14,630

Repayments from MidCap credit facility

(108,278

)

(28,274

)

Repayments from Horizon term loan

(1,000

)

Deferred financing costs from MidCap credit facility

(151

)

Repayments for High Trail December 2020 Note and February 2021 Note

(59,500

)

Repayments for High Trail April 2021 Note

(10,139

)

Borrowings from High Trail February 2021 Note

14,025

Borrowings from High Trail April 2021 Note

110,000

Debt issuance costs from High Trail February 2021 Note

(1,462

)

Debt issuance costs from High Trail April 2021 Note

(2,202

)

Deferred offering costs

(139

)

Insurance obligation payments

(2,357

)

(2,329

)

Insurance financing proceeds

2,660

2,424

Payment for Squatty earnout

(3,988

)

Capital lease obligation payments

(4

)

Cash provided by financing activities

13,499

95,272

EFFECT OF EXCHANGE RATE ON CASH

3

(434

)

NET CHANGE IN CASH AND RESTRICTED CASH FOR PERIOD

7,037

9,502

CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD

30,789

30,097

CASH AND RESTRICTED CASH AT END OF PERIOD

$

37,826

$

39,599

RECONCILIATION OF CASH AND RESTRICTED CASH

CASH

$

37,385

$

37,470

RESTRICTED CASH—Prepaid and other assets

312

2,000

RESTRICTED CASH—Other non-current assets

129

129

TOTAL CASH AND RESTRICTED CASH

$

37,826

$

39,599

ATERIAN, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid for interest

$

2,321

$

4,989

Cash paid for taxes

$

45

$

41

Non-cash consideration paid to contractors

$

1,013

$

4,032

Amended warrants to equity

$

$

75,826

Non-cash barter exchange of inventory for advertising credits

$

889

$

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Note payable on acquisition of Truweo

$

2,455

$

Original issue discount

$

$

2,475

Fair value of contingent consideration

$

$

20,971

Discount of debt relating to warrants issuance

$

$

50,695

Notes Payable of acquisition

$

$

16,550

Issuance of common stock in connection with Healing Solutions and Photo Paper Direct acquisitions

$

$

50,529

Issuance of common stock - debt repayment

$

$

125,562

See notes to condensed consolidated financial statements.

Non-GAAP Financial Measures

We believe that our financial statements and the other financial data included in this press release have been prepared in a manner that complies, in all material respects, with generally accepted accounting principles in the United States (“GAAP”). However, for the reasons discussed below, we have presented certain non-GAAP measures herein.

We have presented the following non-GAAP measures to assist investors in understanding our core net operating results on an on-going basis: (i) Contribution margin; (ii) Contribution margin as a percentage of net revenue; (iii) Adjusted EBITDA; and (iv) Adjusted EBITDA as a percentage of net revenue. These non-GAAP financial measures may also assist investors in making comparisons of our core operating results with those of other companies.

As used herein, Contribution margin represents gross profit less amortization of inventory step-up from acquisitions (included in cost of goods sold) and e-commerce platform commissions, online advertising, selling and logistics expenses (included in sales and distribution expenses). As used herein, Contribution margin as a percentage of net revenue represents Contribution margin divided by net revenue. As used herein, EBITDA represents net loss plus depreciation and amortization, interest expense, net and income tax expense. As used herein, Adjusted EBITDA represents EBITDA plus stock-based compensation expense, changes in fair-market value of earn-outs, amortization of inventory step-up from acquisitions (included in cost of goods sold), changes in fair-market value of warrant liability, loss on initial issuance of warrant, professional fees and transition fees related to acquisitions, reserve on dispute with a PPE supplier, loss from extinguishment of debt, changes of fair-market value of derivative liability related to the term and other expenses, net. As used herein, Adjusted EBITDA as a percentage of net revenue represents Adjusted EBITDA divided by net revenue. Contribution margin, EBITDA and Adjusted EBITDA do not represent and should not be considered as alternatives to loss from operations or net loss, as determined under GAAP.

We present Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue because we believe each of these measures provides an additional metric to evaluate our operations and, when considered with both our GAAP results and the reconciliation to net loss, provides useful supplemental information for investors. We use Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue, together with financial measures prepared in accordance with GAAP, such as sales and gross margins, to assess our historical and prospective operating performance, to provide meaningful comparisons of operating performance across periods, to enhance our understanding of our operating performance and to compare our performance to that of our peers and competitors.

We believe EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue are useful to investors in assessing the operating performance of our business without the effect of non-cash items, while Contribution margin and Contribution margin as a percentage of net revenue are useful to investors in assessing the operating performance of our products as they represent our operating results without the effects of fixed costs and non-cash items. Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue should not be considered in isolation or as alternatives to net loss, loss from operations or any other measure of financial performance calculated and prescribed in accordance with GAAP. Neither EBITDA, Adjusted EBITDA nor Adjusted EBITDA as a percentage of net revenue should be considered a measure of discretionary cash available to us to invest in the growth of our business. Our Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue may not be comparable to similar titled measures in other organizations because other organizations may not calculate Contribution margin, EBITDA, Adjusted EBITDA or Adjusted EBITDA as a percentage of net revenue in the same manner as we do. Our presentation of Contribution margin and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from such terms or by unusual or non-recurring items.

We recognize that EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue, have limitations as analytical financial measures. For example, neither EBITDA nor Adjusted EBITDA reflects:

  • our capital expenditures or future requirements for capital expenditures or mergers and acquisitions;

  • the interest expense or the cash requirements necessary to service interest expense or principal payments, associated with indebtedness;

  • depreciation and amortization, which are non-cash charges, although the assets being depreciated and amortized will likely have to be replaced in the future, or any cash requirements for the replacement of assets;

  • changes in cash requirements for our working capital needs; or

  • changes in fair value of contingent earn-out liabilities, warrant liabilities, and amortization of inventory step-up from acquisitions (included in cost of goods sold) and transition costs from acquisitions.

Additionally, Adjusted EBITDA excludes non-cash expense for stock-based compensation, which is currently and is expected to remain a key element of our overall long-term incentive compensation package.

We also recognize that Contribution margin and Contribution margin as a percentage of net revenue have limitations as analytical financial measures. For example, Contribution margin does not reflect:

  • general and administrative expense necessary to operate our business;

  • research and development expenses necessary for the development, operation and support of our software platform;

  • the fixed costs portion of our sales and distribution expenses including stock-based compensation expense; or

  • changes in fair value of contingent earn-out liabilities, warrant liabilities, and amortization of inventory step-up from acquisitions (included in cost of goods sold).

Contribution Margin

Contribution margin represents gross profit less amortization of inventory step-up from acquisitions (included in cost of goods sold) and e-commerce platform commissions, online advertising, selling and logistics expenses (included in sales and distribution expenses). Contribution margin as a percentage of net revenue represents Contribution margin divided by net revenue. The following table provides a reconciliation of Contribution margin to gross profit, which is the most directly comparable financial measure presented in accordance with GAAP.

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2021

2020

2021

(in thousands, except percentages)

(in thousands, except percentages)

Gross Profit

$

28,095

$

34,175

$

65,994

$

92,982

Add:

Amortization of inventory step-up from acquisitions (included in cost of goods sold)

875

4,916

Less:

E-commerce platform commissions, online advertising, selling and logistics expenses

(16,885

)

(26,818

)

(45,502

)

(77,870

)

Contribution margin

$

11,210

$

8,232

$

20,492

$

20,028

Gross Profit as a percentage of net revenue

47.8

%

50.2

%

45.8

%

50.4

%

Contribution margin as a percentage of net revenue

19.1

%

12.1

%

14.2

%

10.9

%

Adjusted EBITDA

EBITDA represents net loss plus depreciation and amortization, interest expense, net and income tax expense. Adjusted EBITDA represents EBITDA plus stock-based compensation expense, changes in fair-market value of earn-outs, amortization of inventory step-up from acquisitions (included in cost of goods sold), change in fair-market value of warrant liability, loss on initial issuance of warrant, professional fees and transition costs related to acquisitions, reserve on dispute with a PPE supplier, loss from extinguishment of debt, changes of fair-market value of derivative liability related to the term loan and other expenses, net. As used herein, Adjusted EBITDA as a percentage of net revenue represents Adjusted EBITDA divided by net revenue. The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net loss, which is the most directly comparable financial measure presented in accordance with GAAP:

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2021

2020

2021

(in thousands, except percentages)

(in thousands, except percentages)

Net loss

$

(805

)

$

(110,556

)

$

(18,772

)

$

(229,415

)

Add:

Provision for income taxes

0

21

46

64

Interest expense, net

934

2,786

3,120

11,877

Depreciation and amortization

100

1,872

179

4,757

EBITDA

229

(105,877

)

(15,427

)

(212,717

)

Other expense (income), net

(23

)

5

(4

)

43

Change in fair value of contingent earn-out liabilities

(4,245

)

(11,949

)

Amortization of inventory step-up from acquisitions (included in cost of goods sold)

875

4,916

Change in fair market value of warrant liability

(8,134

)

26,455

Derivative liability discount related to term loan

1,360

3,254

Loss on extinguishment of debt

106,991

136,763

Loss on initial issuance of warrant

20,147

Professional fees related to acquisitions

53

1,450

Transition costs from acquisitions

130

1,314

Professional fees related to Photo Paper Direct acquisition

696

Reserve on dispute with PPE supplier

4,100

Stock-based compensation expense

4,861

9,570

17,472

21,330

Adjusted EBITDA

$

5,067

$

728

$

2,041

$

(4,198

)

Net loss as a percentage of net revenue

(1.4

)

%

(162.3

)

%

(13.0

)

%

(124.4

)

%

Adjusted EBITDA as a percentage of net revenue

8.6

%

1.1

%

1.4

%

(2.3

)

%

We believe each of our products goes through three core phases as follows:

  1. Launch phase: During this phase, we leverage our technology to target opportunities identified using AIMEE. During this period of time, and due to the combination of discounts and investment in marketing, our net margin for a product could be as low as negative 35%. In general, a product may stay in the launch phase on average for 3 months.

  2. Sustain phase: Our goal is for every product we launch to enter the sustain phase and become profitable, with a target average of positive 10% net margin (i.e. contribution margin). Over time, our products benefit from economies of scale stemming from purchasing power both with manufacturers and with fulfillment providers.

  3. Liquidate phase: If a product does not enter the sustain phase or if the customer satisfaction of the product (i.e., ratings) are not satisfactory, then it will go to the liquidate phase and we will sell the remaining inventory.

The following table breaks out our quarterly results of operations by our product phases including our PaaS business line:

Three months ended September 30, 2020 (in thousands) (unaudited)

Sustain

Launch

PaaS

Liquidate/
Other

Fixed
Costs

Stock-based
compensation
expense

Total

NET REVENUE

$41,598

$5,029

$340

$11,816

$-

$-

$58,783

COST OF GOODS SOLD

19,849

2,753

-

8,086

-

-

30,688

GROSS PROFIT

21,749

2,276

340

3,730

-

-

$28,095

OPERATING EXPENSES:

Sales and distribution

11,898

2,023

147

2,875

1,253

748

18,944

Research and development

-

-

-

-

1,068

778

1,846

General and administrative

-

-

-

-

3,864

3,335

7,199


Three months ended September 30, 2021 (in thousands) (unaudited)

Sustain

Launch

PaaS

Liquidate/
Other

Fixed
Costs

Stock-based
compensation
expense

Total

NET REVENUE

$59,754

$5,336

$67

$2,964

$-

$-

$68,121

COST OF GOODS SOLD (1)

28,313

3,275

-

2,358

-

-

33,946

GROSS PROFIT

31,441

2,061

67

606

-

-

$34,175

OPERATING EXPENSES:

Sales and distribution (2)

22,818

2,887

-

1,113

3,075

2,444

32,337

Research and development

-

-

-

-

991

1,776

2,767

General and administrative (3)

-

-

-

-

5,493

5,350

10,843

  1. Sustain cost of goods sold includes $0.9 million of amortization of inventory step-up from acquisitions

  2. Fixed costs for sales and distribution includes $0.3m of depreciation and amortization

  3. Fixed costs for general and administrative includes $1.6m of depreciation and amortization

Nine months ended September 30, 2020 (in thousands) (unaudited)

Sustain

Launch

PaaS

Liquidate/
Other

Fixed
Costs

Stock-based
compensation
expens
e

Total

NET REVENUE

$102,549

$16,838

$1,048

$23,777

$-

$-

$144,212

COST OF GOODS SOLD

52,726

9,390

-

16,102

-

-

78,218

GROSS PROFIT

49,823

7,448

1,048

$7,675

-

-

$65,994

OPERATING EXPENSES:

Sales and distribution

30,178

7,502

364

7,516

4,151

1,761

51,472

Research and development

-

-

-

-

3,347

3,231

6,578

General and administrative

-

-

-

-

11,074

12,480

23,554


Nine months ended September 30, 2021 (in thousands) (unaudited)

Sustain

Launch

PaaS

Liquidate/
Other

Fixed
Costs

Stock-based compensation
expens
e

Total

NET REVENUE

$163,466

$12,292

$340

$8,348

$-

$-

$184,446

COST OF GOODS SOLD (4)

74,173

8,191

-

9,100

-

-

91,464

GROSS PROFIT

89,293

4,101

340

$(752

)

-

-

$92,982

OPERATING EXPENSES:

Sales and distribution (5)

67,046

6,415

37

4,359

13,891

4,968

96,716

Research and development

-

-

-

-

3,340

3,880

7,220

General and administrative (6)

-

-

-

-

19,325

12,482

31,807

  1. Sustain cost of goods sold includes $4.9 million of amortization of inventory step-up from acquisitions

  2. Fixed costs for sales and distribution includes $0.5m of depreciation and amortization

  3. Fixed costs for general and administrative includes $4.3m of depreciation and amortization